Cramer says semiconductor market crash shows AI chips are undervalued

CNBC’s Jim Cramer criticized Tuesday’s big semiconductor selloff as some on Wall Street recognized the enduring importance of advanced graphics chips, especially for artificial intelligence. He said he had not. Nvidia.

“There is a shocking lack of understanding about how Nvidia and artificial intelligence work,” he said Wednesday. “As long as there are new inventions and new uses for computer power, the need for these chips will continue to grow. And whatever iteration you do, you can attach them to your software.”

Semiconductor companies saw their stock prices plummet on Tuesday. ASML The company announced disappointing quarterly results one day earlier than expected. The Dutch semiconductor manufacturer lost more than $50 billion in value after the news, and the following stock prices fell: advanced micro device, broadcom And Nvidia. The latter fell more than 6% on the day, but recovered significantly and ended Wednesday up just over 3%.

Kramer pointed out that the only bright spot in ASML’s weak report was sales of AI-related chips. Big Tech and other major companies will continue to seek semiconductors that enable the latest AI technologies, he added.

He noted that the “AI revolution” is just beginning in a variety of fields, including healthcare, manufacturing, cybersecurity, and autonomous driving. And Kramer says AI is a big part of why companies continue to invest heavily in nuclear power.

“I don’t think the need for speed will go away,” he says. “In fact, that amount will only increase, especially as technology companies and power companies work hard to build nuclear power plants to meet the energy needs of Nvidia’s chips.”

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Disclaimer CNBC Investing Club Charitable Trust owns shares of Nvidia.